During the Coronavirus pandemic, the Federal Reserve has engaged in some of the strangest and unprecedented monetary actions in its century-old history. After initially sitting on the sidelines at the start of the COVID-19 public health crisis, the U.S. central bank cranked up the printing presses from billions of dollars to trillions of dollars in 2.3 seconds. Chairman Jerome Powell and his merry band of interventionists embarked upon a crusade of unlimited asset-buying, historically low interest rates, and corporate bond-buying. Subzero rates and stock-buying are the next logical courses of action. But two former Fed officials think the Eccles Building should add a new weapon to its arsenal: recession insurance bonds.

Recession Insurance Bonds

Simon Potter, the former head of the FRBNY’s markets group, and Julia Coronado, an economist who worked for the Board of Governors for eight years, recently spoke with Bloomberg and proposed a new monetary tool to resuscitate an economy. Recession insurance bonds are wire transfers for the American people, a policy that would inevitably please the modern monetary theory (MMT) crowd.

This is how it would work, according to Coronado and Potter. Congress would give the Fed another power to support the American people. The central bank would extend a percent of the gross domestic product to households facing a recession. These bonds would be zero-coupon securities (a bond without interest) and would lie in abeyance until these instruments need to be handed out. When this occurs, the Fed activates the securities and deposits the funds in households’ digital money applications.

They contend that it took Congress too long to send out checks to everyone, arguing that “a separate infrastructure” is necessary. They noted that the Fed could scoop up the bonds instantly without tapping private markets. Potter explained:

“On March 15 they could have said interest rates are now at zero, we’re activating X amount of the bonds, and we’ll be tracking the unemployment rate — if it increases above this level, we’ll buy more. The bonds will be on the asset side of the Fed’s balance sheet; the digital dollars in people’s accounts will be on the liability side.”

The two proponents believe this is the most efficient system to support spending and facilitate confidence. When the labor market is facing a crisis, people are reluctant to take any risks. “[By] getting money to consumers, you can limit the depth and duration of a recession,” Coronado stated, adding that this could “generate real inflation” and prevent negative rates. Ultimately, this is yet another mechanism emanating from the laboratories of mini Dr. Frankensteins.

Digitization of Helicopter Money

In 1969, legendary economist Milton Friedman proposed “helicopter money.” The premise behind this public policy would be allowing central banks to make direct payments to individuals. Friedman wrote in a paper titled “The Quantity of Money”:

“Let us suppose now that one day a helicopter flies over this community and drops an additional $1,000 in bills from the sky, which is, of course, hastily collected by members of the community. Let us suppose further that everyone is convinced that this is a unique event which will never be repeated.”

The concept was revived in the United States at the height of the Great Recession. The Fed was engaged in what was then considered unconventional and unprecedented stimulus and relief efforts. The Fed was headed by Ben Bernanke, who believed it would be the panacea for Japan’s Lost Decade. Thus, the nickname “Helicopter Ben” was born. But not a lot of people took the idea seriously. Years later, when fair is foul and foul is fair, helicopter money is being talked about in earnest.

Today, you do not need to rent Bernanke’s helicopter. You just create a mobile app, scoop up bonds, print some money, and voila. This is the stuff progressives’ and Keynesians’ dreams are made of, but nightmares for everyone else.

Although Friedman was a staunch defender of the Federal Reserve System throughout most of his career, he became a top critic of the institution toward the end of his life. He went as far as calling for its abolition, championing its replacement with a computer program. Friedman averred that the government needed to have a role in the monetary system to regulate the money supply. Still, his concerns over inflation and general mismanagement contributed to his sour opinion on the Eccles Building.

The Fed’s Woke Makeover

It is unclear if the Fed is giving the proposal any thought, but it would not be surprising if this became a genuine prescription for economic downturns. Whatever the case, the U.S. central bank could be going through a makeover in the coming years, thanks to the central planners being awarded an honorary degree in wokenomics. Like its counterparts worldwide, the Fed is embracing social justice. But even if the Fed were not volunteering to be woke, former Vice President Joe Biden would like to make it an ally of the Black Lives Matter Marxist moment. Biden and his campaign are reportedly supporting the idea of giving the central bank a third mandate: racial equality.

Inflation by Any Other Name

Be it helicopter money or recession insurance bonds, its policy support mechanisms lead to the same road: inflation. Since the covidepression in March, the Fed has printed several trillion dollars, and we are beginning to see the effects of this endeavor. Price inflation just had its biggest monthly gain in eight years, and as this printed money travels through the real economy over the next 12 months, the cost of living will spike. Should the Fed start handing out recession insurance bonds, they would not be enough to pay for higher living costs caused by the comparable expansionary moves in the first place.

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Read more from Andrew Moran.